African operations-account credits function as preferential loans to France

Evidence

In this way, it manages to preserve its foreign reserves, as explained in Chapter 2. Even if its trade balance is deficient vis-à-vis the African countries of the franc zone, it can regulate this deficit in its own currency. Moreover, when the African countries of the franc zone register a trade surplus vis-à-vis the rest of the world, France has access to foreign currency at more economically advantageous conditions than it would otherwise face if it borrowed that same currency. In other words, when the operations accounts of the African countries are in credit, France obtains loans at preferential conditions compared to those prevailing on the financial markets. Thus, through the system of the operations account, the African countries grant France greater financial resources than it would have if it had to rely solely on its own means. Describing this mechanism, the economist Joseph Tchundjang Pouemi spoke of ‘drainage by accounting’. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 251

Categorization

• DEFINE: Defines the ‘drainage by accounting’ concept and explains how surplus credits become cheap financing for France.
• XREF: connects to: The CFA franc’s real purpose was draining colonial wealth to France.; African franc-zone reserves effectively grant France subsidized loans below market rates.; Euro pegging diverts trade toward France and blocks local industrialization. (+12 more)

Related

• African countries lost 250 billion CFA francs by depositing reserves in operations accounts (similarity 0.92)
• African franc-zone reserves effectively grant France subsidized loans below market rates. (similarity 0.91)
• African central banks have periodically earned negative real returns on their French-held reserves (similarity 0.86)
• Operations account balances reflect trade flows, not parked savings reserves (similarity 0.85)
• Reserve centralisation persists indirectly through purchases of French debt (similarity 0.85)
• When franc zone accounts are in credit, the central banks finance the French Treasury (similarity 0.85)
• The CFA guarantee arrangement secretly benefits France at Africa’s expense (similarity 0.83)
• Franc-zone bank credit allocation suppressed African firms competing with French companies (similarity 0.83)
• The CFA franc’s real purpose was draining colonial wealth to France. (similarity 0.82)
• The French Treasury holds accounts in each franc zone central bank (similarity 0.82)
• Placing gold in operations accounts cost African countries three years of debt service (similarity 0.81)
• France’s guarantee is backed by pooled African reserves and French central bank seats (similarity 0.81)
• Fixed parity and credit compression make France the zone’s privileged creditor (similarity 0.81)
• African states have effectively paid the French Treasury to hold their reserves. (similarity 0.80)
• The French guarantee of the CFA franc was illusory since African reserves exceeded debts (similarity 0.80)

Broader Connections

• Fixed parity and credit compression make France the zone’s privileged creditor #corroborates (0.70) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 252
• Placing gold in operations accounts cost African countries three years of debt service #expands (0.60) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 581
• French loans to Cameroon were tied and never denominated in CFA francs #exemplifies (0.50) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 253
• France’s convertibility guarantee enabled capital flight that depleted reserves and forced devaluation #complicates (0.50)